The builder of a garage and self-contained accommodation within the grounds of an existing listed cottage has failed to convince the first-tier tribunal that the construction works should be exempt from Value Added Tax (VAT). The tribunal ruled that the new building should be classified as an ‘annexe’ to the cottage and thus could not benefit from the exemption from VAT afforded to buildings designed as dwellings.
In arguing that the new building came within the exemption contained in schedule eight of the Value Added Tax Act 1994, the builder had submitted that it was not physically connected to the cottage and that the planning permission pursuant to which it was constructed did not impose any explicit restriction on its use or disposal as a separate dwelling house.
However, dismissing the builder’s appeal against a decision of Her Majesty’s Revenue and Customs that the exemption did not apply, the tribunal ruled that it was entitled to look beyond the mere functionality of the new building and to consider its relationship to the existing cottage.
The tribunal noted that the entire rationale for seeking planning consent for the new building was to make up for the shortcomings of the accommodation provided by the cottage. The new building had been specifically designed to be in keeping with the cottage and to be in common ownership and use.
Observing that the new building was constructed as ‘a supplementary structure, an adjunct or accessory to the main house’, the tribunal concluded that it was properly viewed as an annexe subject to the standard rate of VAT.